Idea's key operating metrics remain weak; merger with Vodafone soon

Analysts said that the results prove that Idea’s underinvestment in the last 12-18 months compared with Airtel and Jio, is starting to impact its market share. Photo: Reuters
Even though Idea Cellular has surprisingly reported a net profit of Rs 2.57 billion for the June quarter due to a one-time gain from the sale of its tower assets, key performance metrics of the company remain weak.

The Aditya Birla Group company, which will soon be merged with Vodafone India, has seen deterioration in revenues, operating profit, margins and average revenue per user (ARPU). 

In fact, its ARPU of Rs 100 is the lowest in the industry as compared to Rs 102 of Vodafone, Rs 105 of Bharti Airtel and Rs 135 of Reliance Jio. 

Analysts say that it will be very difficult for Vodafone Idea Ltd (name of the merged entity) to improve margins in the hyper-competitive market. According to a report by Credit Suisse, in a worrisome trend, the 3G/4G subscriber base of Idea Cellular has stagnated, with just 1.1 million net increase quarter-on-quarter (Q-o-Q) against monthly run-rate of 3 million for Bharti Airtel and 9 million for Reliance Jio.


Also, Idea registered a capex of Rs 9.8 billion in 1Q19, which is negligible compared Rs 78.7 billion incurred by Airtel and Rs 175 billion by Jio during the same period. 

During the quarter, there was a gain of Rs 33.65 billion from the sale of tower assets. On a sequential basis, revenue declined 2.9 per cent. The Ebitda for the quarter was Rs 6.6 billion, down 65 per cent year-on-year.

Analysts said that the results prove that Idea’s underinvestment in the last 12-18 months compared with Airtel and Jio, is starting to impact its market share. Idea lost 6.6 million subscribers in Q1 and added 1.1 million broadband users (3G+4G), which is significantly below the 12.4 million added by Jio and 9.1 million by Airtel. Also, data volume increased by 24 per cent Q-o-Q against 40 per cent Q-o-Q growth reported by Airtel.


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